SRCE
1st Source Corporation
$87.86
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 34.8% below fair value
You pay
$87.86
Bear
$86.59
Fair
$134.80
Bull
$163.73
Bear
$86.59
-1.4%
ROTCE 10.0% → 1.75x TBV
Fair
$134.80
+53.4%
ROTCE 13.3% → 2.73x TBV
Bull
$163.73
+86.4%
ROTCE 15.3% → 3.31x TBV
Adjust Assumptions
13.3%
7.4%
Key Value Driver
ROTCE (13.3%) vs. cost of equity (7.4%)
Implied Market Multiple
1.78x
Summary
With ROTCE of 13.3% vs. 7.4% cost of equity, fair P/TBV is 2.73x on $49.45 tangible book, implying $134.80 per share. DDM cross-check: $213.83.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Dividend-based valuation: $213.83 (59% above our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly